UK pay growth accelerates in boost for workers; Thames Water welcomes approval of debt restructuring plan – business live
Rolling coverage of the latest economic and financial news, as plans to restructure Thames Water are approved by a High Court judgeThe increase in UK wage growth in the last quarter is likely to deter the Bank of England from rapid cuts to interest rates this year.Currently, the City expect two more quarter-point cuts to Bank rate by the end of the year, to 4%, following the reduction from 4.75% to 4.5% earlier this month.Having weakened over the course of 2024, there were no clear signs that the prospects for the jobs market are improving. At the same time, pay growth is still too high to get inflation back to the 2% target, and firms will soon face the extra cost burden of higher employer National Insurance Contributions (NICs).Faced with this trade-off, we think the MPC will continue to lower Bank Rate gradually, with the next cut likely to come in May, and that the Bank of England will use this extra time to gauge just how sticky inflation will be.“The further rise in pay growth, combined with signs of a gradual easing in employment rather than a collapse, will keep the Bank of England on its “gradual and careful” rate cutting path. We still expect the MPC to cut rates at every other meeting this year, which would leave interest rates at 3.75% by the end of the year.An air of pessimism is befalling the UK jobs market right now, ahead of a sizeable increase in employer’s National Insurance (social security) in April.The surveys on hiring are turning increasingly sour and there’s growing talk of redundancies as firms grapple with the combined hit of tax hikes and a near-7% increase in the National Living Wage. Bank of England policymaker Catherine Mann, explaining her vote for a bumper rate cut this month, spoke of “non-linear” falls in employment. Continue reading...
Rolling coverage of the latest economic and financial news, as plans to restructure Thames Water are approved by a High Court judge
The increase in UK wage growth in the last quarter is likely to deter the Bank of England from rapid cuts to interest rates this year.
Currently, the City expect two more quarter-point cuts to Bank rate by the end of the year, to 4%, following the reduction from 4.75% to 4.5% earlier this month.
Having weakened over the course of 2024, there were no clear signs that the prospects for the jobs market are improving. At the same time, pay growth is still too high to get inflation back to the 2% target, and firms will soon face the extra cost burden of higher employer National Insurance Contributions (NICs).
Faced with this trade-off, we think the MPC will continue to lower Bank Rate gradually, with the next cut likely to come in May, and that the Bank of England will use this extra time to gauge just how sticky inflation will be.
“The further rise in pay growth, combined with signs of a gradual easing in employment rather than a collapse, will keep the Bank of England on its “gradual and careful” rate cutting path. We still expect the MPC to cut rates at every other meeting this year, which would leave interest rates at 3.75% by the end of the year.
An air of pessimism is befalling the UK jobs market right now, ahead of a sizeable increase in employer’s National Insurance (social security) in April.
The surveys on hiring are turning increasingly sour and there’s growing talk of redundancies as firms grapple with the combined hit of tax hikes and a near-7% increase in the National Living Wage. Bank of England policymaker Catherine Mann, explaining her vote for a bumper rate cut this month, spoke of “non-linear” falls in employment. Continue reading...
